A mere 13 percent of households in San Francisco would be able to afford a median priced home in the city, according to a new report on housing affordability from Paragon Real Estate Group.
The news isn’t much better in the surrounding areas in the Bay Area, with San Mateo County sitting at 14 percent and Marin County at 18 percent. The statistics were calculated using median home prices, household income and a 30-year fixed interest rate with 20 percent down.
According to the report, the minimum qualifying income to purchase a median priced home in San Francisco is $269,600, compared to a median household income of $84,160. One bit of irony from the report is that while housing costs have gone up since the height of the housing bubble in 2007, so has affordability percentages.
San Francisco’s 13 percent figure is still above its all-time affordability low of 8 percent nine years ago due to the near bottoming-out of interest rates since the crash and the explosion in the region’s wealth due to the technology industry. “Stock options and IPOs have probably generated trillions of dollars of new wealth,” Patrick Carlisle, Paragon’s chief market analyst said. “It means that a 20-something can walk into a $10 million home in Pacific Heights and buy it with all cash.”
What it also means is that there is a conspicuous gulf between the newly acquired wealth driven by the tech boom and increasing levels of poverty in the Bay Area due to high housing costs. In San Francisco, the report put the proportion of households with incomes levels above $200,000 at 18.4 percent and the proportion of households under $35,000 at 25.6 percent. The report also used a poverty measure that takes into account the cost of living due to housing and a variety of other factors. Based on this California Poverty Measure, an estimated 23.4 percent of San Francisco residents are currently living below the poverty line. “What struck me most is that there are 124,000 households in the Bay Area that would qualify as being in the top 1 percent,” Carlisle said. “There’s a huge contrast from that to the high levels of poverty that most of us are not aware of, that we don’t see it in the urban professional world and the neighborhoods that we live in.”
With the median price for a home San Francisco breaching $1.3 million, the majority of residents in the city are renters. However, the report points out that renters are the ones who are most vulnerable when it comes to increasing home prices, which generally leads to higher housing costs without any corresponding benefits.
“The renters in the Bay Area have been the population that has really been damaged in this recovery which started in 2012 because they don’t have any advantages in tax breaks or interest rates,” Carlisle said. “They really get the short end of the stick when it comes to appreciation.”
According to the report, high housing costs look to remain a preeminent issue in the Bay Area and may lead companies and residents to contemplate a future outside of the region.
While, Carlisle said there hasn’t yet been a “flood in people abandoning the area,” he also cited a recent Bay Area Council poll that found more than one-third of Bay Area residents say they are ready to leave in the next few years, citing cost of living and housing as the major reasons.